Washington Voters Win in Battle of the Billionaires

The political math was simple and should have been fool-proof: Proponents of a high-earner income tax in the state of Washington needed only a majority of voters to approve a tax on a tiny minority of their peers.

After all, Initiative 1098, which would have imposed a 5 percent tax on the adjusted gross income of individuals who earn more than $200,000 — or $400,000 for couples — and a 9 percent tax on the AGI of individuals who earn more than $500,000 — or $1 million for couples — would have affected barely more than 1 percent of the state population.

For a long time, it appeared the measure would pass. In April, support for the proposal approached 70 percent of voters, according to a poll conducted by Survey USA. Opposition to the tax was still less than 50 percent as recently as October 10, according to The Elway Poll.

But this week, more than 65 percent of Washington voters cast their ballots against I-1098. Clearly, citizens of the state saw the underlying reality that state legislators wanted them to ignore: The tax would ultimately have affected more than just high earners.

“People recognize … their economic success is related to the economic success of high-earner people,” said Joseph Henchman, tax counsel and director of state projects for The Tax Foundation. “These are the people who create jobs, these are the people who invest, that help build an economy.”

In addition, the tax could easily have been extended to other tax brackets in the future — and likely would have been. Since World War II, 11 states have adopted a state income tax. Most of them have since raised their rates on both low- and high-income people, according to a Tax Foundation special report.

“The voters overwhelmingly agreed that this tax would likely be expanded,” said Scott Stanzel, Defeat 1098 campaign manager. “The fundamental issue in this fight was that people didn’t trust the politicians to not expand it to them.”

Notably, voters cut through a lot of cash to come to that consensus. The proposal sparked what some called “the battle of the billionaires,” with richest American Bill Gates supporting the tax and various other Microsoft executives and the founder of Amazon.com actively — and monetarily — opposing it.

Government employee unions, including the Service Employees International Union and the National Education Association, also became involved. One SEIU employee even allegedly submitted forged signatures in support of the initiative. By Election Day, unions had spent more than $4 million to try to institute the income tax and proponents had spent more than $6 million, Stanzel said.

“This was a battle between taxpayers and government employee unions,” he said. “The fact that … we won by 30 points says a lot about how strongly people feel about the role of government and the increased spending that we’ve seen at the state level and how Washingtonians thought that it was time for the state legislature to live within its means.”

Washingtonians aren’t alone in that thought. The defeat of the initiative in every single Washington county reflects a wider national trend, Henchman said.

“The public very much wants to see governments try to get their fiscal house in order on the spending side and just make really concerted efforts at that before they tackle the tax side,” he said.

Stanzel agrees. “People’s view of government and the spending of tax dollars is fundamentally shifting,” he said.

Still, a need to be on guard exists. The high-earner income taxes currently in place in New Jersey and Maryland will expire this year, Henchman said, but could be extended if voters don’t hold elected officials to their campaign promises. Meanwhile, Democrat Mark Dayton, who is locked in a tight race for Minnesota governor, included a proposal for such a tax in his platform.

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